The State of Organizations 2023 - Flipbook - Page 5
INTRODUCTION
C
EOs together with their leadership
teams around the world have been
operating in a highly volatile and
uncertain environment. They have
had to cope with the COVID-19
pandemic and then with the economic slowdown
and soaring inflation that followed, compounded
by geopolitical disruption from the war in Ukraine.
In such an unsettled period, it’s no surprise to find
that efforts to strengthen short-term resilience
have dominated the agenda at many companies.
Less obviously—but no less importantly—
business leaders are having to address a range
of organizational shifts that have significant
implications for structures, processes, and people.
These shifts are both challenging and harbingers
of opportunity, depending on how organizations
address them.
Ten shifts that
are transforming
organizations—
and what to do
about them
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Some shifts, most notably how to strike the right
balance between in-person and remote work,
took place at the height of the pandemic and have
lingered. Others, such as an ongoing mismatch in
the labor market and a decline in employees’ mental
health, have been accelerated by the COVID-19
crisis. Still others, such as effective leadership
development and capability building, are perennial
organizational issues that have proved even more
vexing—and even more important to get right—in
the current uncertain environment. All have longterm consequences, and all require clearheaded
thinking and decisive action that can’t be postponed.
Addressing these developments, and navigating the
changing organizational landscape that results, is
far from simple. As part of research into this topic,
we conducted a State of Organizations Survey of
more than 2,500 business leaders around the world.
Only half say their organizations are well prepared
to anticipate and react to external shocks, and twothirds see their organizations as overly complex
and inefficient.
How can leaders and their teams reorient their
organizations? Where to look? Where to start?
Management philosophies and approaches
that succeeded in the past may no longer be fit
for purpose in a world in which companies and
industries are boundaryless, every organization is
digital, hybrid work environments are taking hold,
and the employee–employer contract is up for
renewal (and potential overhaul).
With this in mind, we have launched McKinsey’s
The State of Organizations 2023 report, an ongoing
research initiative that both pinpoints the most
important people, procedural, and structural shifts
that organizations are grappling with and seeks to
provide some ideas and suggestions about how to
approach them.
In this inaugural report, we go in depth on ten of
the most important shifts. As a part of the exercise,
we share inspiring stories and best practices
from beacons—organizations that have been
able to adapt to recent economic and operational
disruptions and forge a new path for the modern
organization.
We conclude by suggesting an integrated approach
to achieving organizational change at scale. It
comprises developing a clear perspective about
the extent of the organizational changes an
organization truly needs, cultivating talent, investing
in leadership, and responding—at scale—to
changing circumstances, new challenges, and
new opportunities.
The potential rewards of a job well done are
significant: leaders who can unlock the most value
from their organizations today can become the
performance champions of tomorrow. Conversely,
those that fail to improve their organizations may
fall behind peers who have succeeded in doing so,
putting in jeopardy their competitive position and
growth prospects. McKinsey research has shown a
direct link between an organization’s health and its
financial performance.
In any discussion of organizations, it’s important
to recognize their fundamental importance to
our lives. Of the approximately 8.0 billion humans
on this planet, about 3.3 billion of them “lived” in
organizations in 2022. They are being shaped, both
directly and indirectly, every day by what goes on at
work—at a time when the very definition of “being
at work” is in a state of flux. Getting organizations
right is thus not just about individual companies and
institutions; it’s about the broader well-being
of society.
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